G7 to press on with bank reforms, Japan escapes censure

AYLESBURY, England Sat May 11, 2013 11:03am EDT

1 of 3. Britain's Chancellor of the Exchequer George Osborne speaks to reporters at thye close of the G7 Finance Ministers and central bank governors summit at Hartwell House in Aylesbury, southern England May 11, 2013.

Credit: Reuters/Yui Mok/POOL

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AYLESBURY, England (Reuters) - Group of Seven finance officials agreed on Saturday to redouble efforts to deal with failing banks and gave a green light to Japan's drive to galvanize its economy.

British finance minister George Osborne said the finance ministers and central bankers meeting 40 miles outside London focused on unfinished bank reforms, with signs that plans for a euro zone banking union are fraying.

"It is important to complete swiftly our work to ensure that no banks are too big to fail," Osborne told reporters after hosting a two-day meeting in a stately home set in rolling countryside.

"We must put regimes in place ... to deal with failing banks and to protect taxpayers and to do so in a globally consistent manner," he said.

The emergency rescue of Cyprus after a near meltdown in March served as a reminder of the need to finish an overhaul of the banking sector, five years after the world financial crisis began.

Germany has come under pressure to give more support to a banking union in the euro zone. The plan could help strengthen the single currency area, but Berlin worries it may pay too much for future bank bailouts if it signs up to a scheme to wind up stricken lenders.

While the first step - to create a single bank supervisor under the European Central Bank - looks set to be in place by mid-2014, a second pillar, a 'resolution' fund to close failed banks, is in doubt. And there is little prospect that a single deposit guarantee scheme will ever see the light of day.

A senior U.S. Treasury official said the talks at the 17th-century Hartwell House zeroed in on the need not just for better bank supervision but also to clean up balance sheets so lending can pick up.

"There was a sense of urgency among the euro area participants," the official said.

German Finance Minister Wolfgang Schaeuble countered that the euro zone was no longer the main risk to the world economy.

As at previous international meetings, Japan escaped any censure for printing money on a scale that has pushed the yen sharply lower.

Osborne said the G7 - the United States, Germany, Japan, Britain, Italy, France and Canada - reaffirmed that fiscal and monetary policy should be aimed at domestic concerns, not currency manipulation.

"We will not target exchange rates," Osborne said. "I would say that the statement by the G7 of earlier this year was a successful statement and one that has been held to."

The yen hit a four-year low against the dollar on Friday, driven in part by Japanese investors shifting into foreign bonds, a move that had been expected since the Bank of Japan unveiled a massive stimulus plan.

But having urged Tokyo for years to do something to revive its economy, other world powers are not in a strong position to complain now that it is doing so. Then there is the fact that central banks such as the Federal Reserve and Bank of England have printed money in the way the Bank of Japan is.

Japanese Finance Minister Taro Aso said the G7 had leveled no criticism at Japan's monetary policy but Schaeuble said there had been "intense discussions" and that the situation would be monitored carefully.

GROWTH DEBATE

Debate has also heated up about the need for governments to ease up on austerity, something Germany, Britain and Canada view with caution but Washington, Paris and Rome favor.

Osborne said there was less disagreement about whether governments should focus on debt-cutting or growth-boosting measures than is commonly assumed.

"Everyone is clear that there needs to be credible medium-term fiscal consolidation ... We also agreed that there needs to be flexibility," he said. "Growth prospects remain uneven and we can't take the global recovery for granted."

But his suggestion before the meeting that it should consider what more monetary policy could do to support economic recovery appeared to fall on deaf ears.

"There wasn't any call to do more," European Central Bank chief Mario Draghi told reporters after the meeting.

"It is quite clear that all central banks have done a lot, each one within its own mandate. So (the meeting) was just taking note of this ... All of us have really been active."

Several officials from visiting delegations questioned why Britain had called the gathering just three weeks after they and others met at International Monetary Fund meetings in Washington, but Bank of England Governor Mervyn King said the informal nature of the discussions had paid dividends.

"Freed from burden to agree a communiqué, the principals engaged more with each than I can recall before and as a result genuinely made real progress in taking forward some of the questions and issues that are facing the G7," he said.

(Additional reporting by David Milliken and Leika Kihara.; Writing by Mike Peacock; Editing by Mark Potter)

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Comments (4)
blah77 wrote:
In other words…

Go for it Japan! keep depreciating your currency as you drive for more export-led growth. We would say more but right now we are busy running the printing presses also! Anyway, it’s cool as long as you are part of our cool developed country country club!

P.S: Ahem, we will continue to point our ‘tsk tsk’ fingers at you China. Currency devaluation in the developed world is okay (we like to use a less threatening term on ourselves) but currency *manipulation* in your corner of the developing world is a big no no. What’s good for the goose is not so good for the gander this time because we got a lifestyle to maintain here! Can’t you understand that it is Gods will for every American family to have 3 cars, 5 TVs, 10 iPads/iPhone/etc, and a 4 bedroom/2000 sqft home? You all should just play ball and be subservient to our will and bank accounts. Don’t even think about trying to boost your own economy if it doesn’t benefit us in some obvious fashion.

May 11, 2013 1:51pm EDT  --  Report as abuse
Janeallen wrote:
BOYCOTT JAPAN FOR PLAYING RACIST NEO-NAZISM BRIBERY CARD at G8.

It basically tells the G8: “Keep treating Japan in a corrupt way, give Japan the freedom to be predatory over poorer developing countries, and Japan will help keep the stranglehold of richer Aryan countries over the developing world.”

It’s just a matter of time — G8 will be called the Racist 8 that enforces predatory, corrupt economic policies over the rest of the world.

SHAME ON THE RACIST CORRUPT G8!

JAPAN MANIPULATED CURRENCY FLAGRANTLY BY DEFLATING THE YEN by 25%.
NO CENSOR: CORRUPTION, SELLOUT OF G8 AGAINST THE WORLD.

BILLIONS OF VICTIMS SCREAM AT G8.
HUNDRED OF MILLIONS OF VICTIMS OF EXACTLY THIS TYPE OF JAPANESE CORRUPT, RACIST, SELLOUT OF THE REST OF THE WORLD SCREAM FROM THEIR GRAVES.

JAPAN IS THE BIGGEST ENDANGERMENT TO WORLD PEACE, SECURITY, JUSTICE, PARTICULARLY ECONOMIC JUSTICE.

May 11, 2013 5:05pm EDT  --  Report as abuse
Janeallen wrote:
By the way, all the media who lied for Japan are culprits.
NPR’s Business news says, japan just followed America — Dah, if Japan just followed American currency policy, BOTH American and Japanese currency would go the SAME way.

AMERICAN TRAITOR: SUSAN on NIGHTLY BUSINESS REPORT ON PBS.

May 11, 2013 5:06pm EDT  --  Report as abuse
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